Question

This month, the local widget factory produced 100 widgets. The total variable cost of production was $500 and the average total cost of production was $8.

a)​What is the total cost?

b)​What is the total fixed cost?

c)​What is the average fixed cost?

d)​What is the average variable cost?

Answer 1

From the above question, these are given

Total Variable cost = $500

Average total cost = $8

Units produced = 100

A) Total Cost

Total Cost = Average total cost x Units

Total Cost = Fixed cost + Variable cost

Now total cost can be calculated from any of the above formulas. As in the question, the average total cost is given hence we will use the first method.

Total Cost = Average total cost x Units

Total Cost = $8 x 100

Total Cost = $800

B) Total Fixed Cost

Total Cost = Fixed cost + Variable cost

Fixed cost = Total cost - Variable cost

Fixed cost = 800 - 500

Fixed cost = 300

C) Average Fixed Cost

Average fixed cost = Fixed Cost / Units

Average fixed cost = 300 / 100

Average fixed cost = $3

D) Average Variable Cost

Average Variable cost = Variable Cost / Units

Average Variable cost = 500 / 100

Average Variable cost = $5